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Is the bailout enough to right-foot the banks?
Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson are urging Congress to act swiftly on a $700 billion bailout plan for the financial system.
Politico.com quotes a former Federal Reserve official as saying, “the alternative is complete financial Armageddon and a great depression.”
Hugo Duncan writes in the Evening Standard that if the bailout fails, “banking stocks are likely to drag shares around the world into the mire sparking further panic over the financial system and state of the economy. It would make recession in America and Britain ever more likely, with house prices and standards of living falling and repossessions and unemployment rising.”
Assuming that Congress approves the Bernanke-Paulson bailout plan, do you think it is enough to stabilize the banking sector?
The impact on Main Street from the crisis on Wall Street is another open question. “How long it will take the banks to restore health to their balance sheets, raise capital and start lending money again,” Bernard Baumohl, chief global economist at the Economic Outlook Group, tells Nick Carey. ”That could take a year and credit conditions may start to improve in the second half of 2009.”
For full coverage of the crisis in credit, click here.